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CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

Adoption of International Financial Reporting Standards (IFRS) became an important topic of interest after 1973 when variation in accounting practices and financial information asymmetry became sources of concern for accounting professionals and investors (Carlson, 1997). The concern grew as the globalisation of businesses continually evolved. Following the European Union (EU) implementation of IFRS, other countries such as Australia, New Zealand, Canada, South Africa and Nigeria have made changes to the Generally Accepted Accounting Principles (GAAPs). However, accounting researchers are concerned whether the implementation of IFRS, a product of a monopolistic accounting standard setter is the right decision towards a global accounting practice, since accounting is related to culture and culture is dynamic across jurisdictions and within countries (Borker, 2013b; Gray, 1988; Sunder, 2009).

In 2010, the Financial Reporting Council of Nigeria (FRC) implemented IFRS for all publicly accountable companies (Bakre & Lauwo, 2016). The IFRS requirements led to the variations in the responses to the changes in accounting standards. Some companies adopted the IFRS while other did not. Consequently, some listed companies were deleted from the Nigerian Stock Exchange (NSE) due to non-compliance with the NSE X-compliance initiative. The X-compliance report is the NSE initiative to ensure that listed companies comply with the requirements for listing on the stock exchange, including compliance with the accounting standards (Nigeria Stock Exchange, 2013). Non-listed companies were also required to adopt IFRS effective from January 2013 (Madawaki, 2012). The requirement for non-listed companies in Nigeria to adopt IFRS is one of the uncommon accounting regulations among the IFRS jurisdictions.

However, IFRS can be adopted for different purposes, especially for companies that aim to be listed on an international stock exchange (Nobes, 2008; Street & Bryant, 2000; Street, Gray, & Bryant, 1999). International Financial Reporting Standards implementation in Nigeria resulted in two outcomes, namely IFRS adoption and non-adoption. The dichotomous reaction to IFRS adoption in Nigeria is contrary to the FRC purpose of implementing IFRS. In other words, IFRS were implemented to bring economic benefits to companies in Nigeria. The non-compliance with IFRS adoption led to the FRC warnings of sanctions, deletion of companies from the NSE and, as an extreme measure, deregistration from the Registrar of Companies in Nigeria. However, the factors that influence the variability in the decisions to

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